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South Financial, American States Water Decline

By

Geoffrey Rogow

Updated Oct. 18, 2008 12:01 a.m. ET

Small-cap stocks closed lower again Friday as lingering weakness in the credit markets and housing led to another flight from risk.

"The unclogging of the credit system is critical as to whether the lights go out here. You'll face a bleak economy that we'll have to work through for 12 to 24 months, and it's not the kind we've seen in the last 30 years, more in the vein of the 1970s," said Joseph Battipaglia, chief market strategist for the private client group at Stifel Nicolaus.